457 Sponsor’s Training Benchmark Obligations

Overview

Businesses operating in Australia seeking to hire and sponsor talented migrant workers should be aware of the requirements associated with training Australian citizens and permanent residents.

Currently, businesses operating for more than 12 months must meet either Training Benchmark A or B as set out below when seeking to apply for Business Sponsorship under the subclass 457 visa program or nominate a foreign national under the Direct Entry Stream of the Employer Nomination Scheme (ENS). Australian start-up businesses operating for less than 12 months must instead demonstrate an auditable plan for achieving these benchmarks.

General Requirements for Standard Business Sponsors

As a standard business sponsor, you must contribute to the training of Australians by either:

spending an equivalent of at least two per cent of your payroll in payments to an industry training fund that operates in the same or related industry as you;

spending an equivalent to at least one per cent of your payroll in the provision of training to employees of your business who are Australian citizens or Australian permanent residents.

The obligation begins on the day you are approved as a sponsor, and must be met every 12 months from the date of approval as a sponsor, where there is a sponsored person employed for any part of that 12 month period.

1 July Changes

On 1 July two new laws were introduced to provide greater clarity on what is ‘acceptable expenditure’, what ‘expenditure periods’ will be applied, and more clearly defines ‘payroll’.

Employers should take note that the new training benchmarks apply to ENS Direct Entry nominations and Standard Business Sponsorship applications or renewals lodged on or after July 1, 2017 and will apply until March 2018, when they will be replaced by a training levy (see details below).

How to calculate payroll

Employers can calculate payroll expenditure as follows:

A. The total amount of the two payments specified below:

Any wages, remuneration, salary, commission, bonuses, allowances, superannuation contributions or eligible termination payments, defined as wages in payroll tax legislation for the relevant State/Territory, that the business has paid to their employees during the same period; and

Payments made to contractors or subcontractors during the same period if work provided by the contractor is related to the service/product provided by the business, regardless of whether such payments are included for payroll tax purposes or not;

OR

B. If the business does not pay either of the types of payments specified above:

The total monetary values of the director’s salaries, fees and drawn payments; or

The actual profit of the business.

Specific Types of Training Expenditure

Recent expenditure for the training benchmark is defined as “expenditure made in the previous financial year or the previous 12 months”.

Expenditure that can count towards the benchmarks include:

Eligible Training Expenditure for Standard Business Sponsors

New Training Levy For Employer Sponsors

From March 2018, employers that sponsor foreign workers on the new Temporary Skill Shortage (TSS) visa and employer sponsored permanent skilled visas will be required to pay a levy into the new ‘Skilling Australians Fund’.

The levy will replace the training benchmarks which currently apply to the subclass 457 and permanent employer sponsored visa programs. Read our article about the new Skilling Australians Fund here.

What this means for your business

Employers should take note that the new training benchmark rules apply to ENS Direct Entry nominations and standard business sponsorship applications lodged on or after July 1, 2017.

The new rules tighten what is acceptable expenditure. For example, an internal trainer’s salary may now only be counted if “their sole role is to provide training” whereby the previous policy position was that they could be counted where such training was a “key part” of the trainer’s job. This will restrict inclusion of internal or on-the-job training by more senior staff where training is not their sole function.

Employers will also be required to provide additional information about their training in application forms from 1 July 2017.

Top 3 Tips for Managing Training Compliance

Review your training policies and expenditure: Analyse your training expenditure for previous years to determine whether your business has relied on types of expenditure that would no longer eligible expenditure. Adjust your training plans in line with policy changes to ensure you are meeting the new criteria for future applications.

Monitor training expenditure annually: It is important that business sponsors review their training expenditure on each anniversary date of the sponsorship term and ensure expenditure is properly documented. Sponsors are obliged to meet the training benchmarks each year of the sponsorship term while actively sponsoring 457 visa holders and keep proper records of their training. If a company has not met its training obligations it will be unable to renew its sponsorship status or nominated employees for ENS permanent residence visas.

Formalise on-the-job training: Whilst many types of on-the-job training cannot be counted towards your training benchmarks, it is possible to formalise these types of training to align with expenditure than can be counted. For instance, it may be possible to create more structured training programs such as a formal course or graduate program to meet the new criteria.

How we can help

We can help you ensure that your company is ready to meet its training obligations from 1 July 2017, including reviewing training policies, providing guidance on redeveloping training plans and conducting training audits.